Financial planning might sound like something only the very rich can afford. Maybe you’re picturing stocks, bonds and second homes — but most all of us do some sort of financial planning. If you’ve ever scrambled to make ends meet before payday, that’s an extreme form of financial planning.

You don’t need to be wealthy to reap the benefits of financial planning: The universal goal of financial planning is to create an ongoing process that will reduce your stress about money, support you and your family’s current needs, and build a nest egg for your retirement dreams.

What is financial planning? 6 key steps

Financial planning prompts you to check your current finances against your long-term goals. The process nudges you along, asking about things like how much money you have and how much you’ll need to meet your goals. Then it lays out steps to get there.

Whether you’re mapping out your own financial plan or you’re hiring a financial planner, prepare to work through these steps:

Identify your goals: Think broadly about life goals and what you need financially to achieve them. “Do you want to buy a home? Do you have kids, do you want kids?” says Wayne Maslyk, president of Great Lakes Benefits and Wealth Management in Sandusky, Ohio. “What age would you like to retire? What kind of income are you going to need?”

Collect your financial data: What is your net worth — that is, the value of your cash, investments and other assets versus your debts? How much cash is coming in and going out? “The money you spent last year, where did it go? What did you spend on groceries, what did you spend eating out, going on vacations?” Maslyk says. “All these things get tied into the financial plan.”

Put it all together: Contrast your goals with the data about your income, expenses and net worth. Don’t be disheartened — remember, you’re creating the map to get from where you are now to where you want to be.

Develop an immediate, medium-term and long-term plan: Making and following a budget is a common immediate step, financial advisors say. Reducing credit card or other high-interest debt is a typical medium-term plan that can unlock long-term savings growth. Life stages will dictate some things: “If you’re nearing retirement, you want to think about when you want to retire, and how to make the money last,” says Mario Hernandez, director of operations at Gemmer Asset Management in Walnut Creek, California. “If you’re a millennial, you need to start doing something now about retirement savings if you haven’t started.”

Put your plan into effect: Set realistic goals, and check in on your budget and short-term goals each month. The goals should support one another. For example, a goal to reduce high-interest credit card debt by $250 a month helps a medium-term goal of improving your credit, which will help longer-term goals like buying a home or investing more for retirement.

Monitor and update in response to life events: Financial planning isn’t a static process. Experts suggest checking in at least once a year to see how you’re progressing against your goals. Often, life intervenes: Preparation for marriage or divorce, the birth of a baby and emergency health situations are common times when financial plans need to be updated. “Check in and change as needed on an ongoing basis,” Maslyk says.

Human or digital financial advisor?

There are more choices than ever for affordable financial advice, whether you want to do it yourself through a robo-advisor or work with a human financial planner. You can even have it both ways: More digital advisors are offering hybrid models, which pair automated investing and occasional check-ins with human advisors.

It’s good to have an outside opinion … money can be very emotional

Celia Brugge, Dogwood Financial Planning

For couples, a third party can direct the often-thorny conversations about big money decisions. “It’s good to have an outside opinion … money can be very emotional,” says Celia Brugge of Dogwood Financial Planning in Memphis, Tennessee.

Besides budgeting and a retirement investment strategy, a financial advisor can jump-start work on other financial issues that may help you reach your goals, such as estate planning, tax strategy or choosing proper insurance, Maslyk says. “A lot of people think the job of a financial planner is to pick stocks for you, but the investing portion is just a part of financial planning,” he says.

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